SANDUSKY, Ohio – Cedar Fair Entertainment Company, owner of Dorney Park and Wildwater Kingdom, is one of those companies that suffered an unmitigated disaster in 2020 caused by events, namely COVID-19, that were entirely out of its control.
In those cases, just about the only things management can do are hold on and plan for the future as best they can.
Cedar Fair’s results for first quarter 2021 are awful compared to 2020, but first quarter results are always bad for an industry that doesn’t get rolling until the second and third quarters.
The good news in the quarterly report wasn’t the results, rather it was how Cedar Fair has handled the pandemic in the quarter and its strategic plan for the future.
Cedar Fair President and CEO Richard A. Zimmerman said in a statement, “Over the course of the past year, we have been taking actions to transform our business into a more efficient, consumer-focused, and profitable company. Combined with the strategic initiatives we began to implement several years ago to broaden and enhance the guest experience, we expect our business optimization program will help drive superior results and enhanced value in the business for both our guests and our investors.”
Cedar Fair plans to have all of its U.S. properties open and entertaining guests by Memorial Day weekend. Due to unfavorable COVID-19 trends in Ontario, Canada's Wonderland is not expected to open as originally scheduled. The park will remain ready to open as quickly as possible once operating restrictions are lifted by local authorities.
In the meantime, park operating expenses, which are being partially offset by government subsidies while operations are disrupted, are being minimized as much as possible.
“Based on recent trends and consumer survey results, coupled with broad vaccination efforts underway across the nation, we anticipate strong pent-up consumer demand for closer-to-home, outdoor entertainment, particularly in the year’s second half,” said Zimmerman.
The company said that its 2021 operating strategy is focused on maximizing performance during its seasonally weighted second half of the year. With park openings right around the corner, the company is again seeing a lift in season pass sales, which are incremental to the more than 1.8 million active season passes already on the books and valid through the 2021 season.
Zimmerman added, “We continue our disciplined approach of managing liquidity and the use of cash, with planned 2021 capital investments totaling less than historical levels. Because several of our parks were closed for the 2020 season, and the others were only partially open for special events, we have brand new rides and attractions from last year that have yet to be introduced to and enjoyed by many of our guests.”
Cedar Fair intends to invest approximately $100 million in its parks during the year, with roughly a third focused on the completion of select unfinished 2020 projects, including renovations at some of its resort properties; another third focused on essential compliance and infrastructure requirements for the current season; and the final third directed at the start of projects planned for the 2022 season.
Over time, the company anticipates annual capital expenditures within its core business returning to historical investment levels of between 9-10% of revenues.
Business Optimization Program
As part of its long-range strategic plan, Cedar Fair has commenced a business optimization program which is designed to drive growth in the business over the next two to three years. Once fully executed, the company expects its optimization efforts to generate an incremental $50 million in annual run-rate benefit once the business returns to historical attendance levels.
The business optimization efforts will focus on capturing cost efficiencies and driving incremental revenues through more data-driven decision making, as well as enhancements to the guest experience to meet changing consumer behaviors and preferences. These efforts represent an intentional evolution of the company’s business approach, which will in part result in the further build-out of shared-service capabilities, freeing the park teams from time consuming administrative responsibilities so they can focus on the key long-term objectives of broadening and enhancing the guest experience.
The company expects to realize approximately one-third of the business optimization benefits through reductions in fixed costs that are independent of attendance levels. The balance of the benefits is expected to be realized through incremental revenue opportunities and variable cost savings.
First Quarter 2021 Results
In response to the spread of the coronavirus, and in compliance with California mandates, full park operations at Knott’s Berry Farm, Cedar Fair’s only year-round park, remained suspended in the first quarter, with the park limited to hosting a culinary festival beginning in early March.
Given the effects of the coronavirus pandemic on park operations, results for the 2021 first quarter are not directly comparable to results for 2020, which included full park operations of Knott’s Berry Farm, as well as abbreviated operations of the two Schlitterbahn water parks prior to the suspension of all park operations beginning on March 14, 2020.
In the 2021 first quarter, the Company had zero total operating days, excluding the culinary festival at Knott’s Berry Farm, compared to 90 operating days in the first quarter of 2020. For the quarter ended March 28, 2021, net revenues totaled $10 million versus $54 million for the first quarter of 2020. Because amusement park operations were suspended in the first quarter of 2021, there was no in-park per capita spending for the period.
The company’s operating loss for the first quarter totaled $92 million, compared with an operating loss of $184 million, including $88 million of impairment of goodwill, for the first quarter of 2020. The operating loss in the first quarter of 2021 was the result of the 82% decline in net revenues between years, offset in part by the $39 million decrease in operating costs and expenses.
The company reported a first quarter net loss of $110 million, or $1.95 per diluted LP unit, directly attributable to the impact of COVID-19 on attendance and revenues during the period, offset in part by cost management.
Total liquidity as of March 28, 2021, inclusive of $359 million of undrawn capacity under the company’s revolving credit facility, was $631 million. Based on this level of liquidity, Cedar Fair has concluded it will have sufficient liquidity to satisfy its obligations and remain in compliance with debt covenants at least through the second quarter of 2022.
“We are pleased that all of our U.S. properties are ready to reopen in May,” Zimmerman said, “and we can’t wait to welcome back our guests, including our loyal season passholders, many of whom may be returning for the first time since 2019.”
Cedar Fair Entertainment Company (NYSE: FUN), one of the largest regional amusement resort operators in the world, is a publicly traded partnership based in Sandusky, Ohio. The company owns and operated 13 amusement parks, along with two outdoor water parks, one indoor water park and five hotels. It also operates an additional theme park under a management contract. Its parks are located in Ohio, California, North Carolina, South Carolina, Virginia, Pennsylvania, Minnesota, Missouri, Michigan, Texas and Toronto, Ontario.